P-Notes clarification by FM lifts spirit of Indian equities

Indian equities added gains to continue its firm trade in green in the late afternoon session on account of buying in frontline blue chip counters. Besides, market participants also got some solace after Finance Minister Pranab Mukherjee stated that government will issue clarification on its position on taxation of investments from overseas, amid FIIs expressing concern on the proposed anti-tax avoidance rules in due course. On giving clarifications on promissory-notes (P-Notes) issue, FM opined that the intention of government is not to harass genuine investors and IT department will examine taxability of FIIs. Traders were seen piling up position in Metal, Realty and Oil & Gas sector. Meanwhile, global rating agency Fitch expects Indian economy to grow at 7.5% in 2012-13. Hindalco, Tata Steel, SAIL, Sesa Goa and Sterlite from Metal sector were trading firm in green pulling the markets higher. DLF from Realty counter was trading with gain of around more than one percent pushing markets higher. Industry heavyweight RIL was trading in green with gain of around more than two and half percent giving the much needed support. Also, GAIL India, ONGC and BPCL from Oil & Gas sector were firm lifting the market higher.

On the global front, Asian markets were trading on a mix note while the European markets were trading in green on optimistic note. On the home turf, the NSE Nifty and BSE Sensex were trading above their psychological 5,250 and 17,300 levels respectively. The market breadth on BSE was in favor of advances in the ratio of 1838:855 while 121 scrips remained unchanged.

The BSE Sensex is currently trading at 17,346.41 up by 287.80 points or 1.69% after trading as high as 17,364.86 and as low as 17,105.22. There were 28 stocks advancing against 2 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index surged 1.61% while Small cap soared 1.57%.

On the BSE sectoral space, Metal up 2.35%, Realty up 2.23%, Oil & Gas up 2.17%, Bankex up 2.14% and PSU up 1.85% were the major gainers, while there were no laggards in the space.

Hindalco up 4.17%, Tata Steel up 3.64%, ICICI Bank up 3.04%, BHEL up 2.83 and RIL up 2.72% were the major gainers on the Sensex, while Sun Pharma down 0.24% and Jindal Steel down 0.22% were the only losers in the index.

Meanwhile, the Food Ministry has decided to hike its interest rates on loans that it provides to sugar companies. The hike has come in as a response to the increase in interest rates by the Reserve Bank of India on 13 February.

The Food Ministry lends money to the sugar industry at subsidized rates through a fund called the Sugar Development Fund (SDF). Uptil now it has been charging an interest rate of 4% which will be hiked to 7.5% per annum with effect from February 14, 2012.The fund keeps its interest rates 2% below the RBI’s rate. The fund aims towards sugarcane development, modernisation, co-generation and ethanol projects.

The corpus of the Sugar Development Fund, now around Rs 850 crore-Rs 900 crore, is built through a special levy of central cess of Rs 24 per quintal of sugar production. So far in the current fiscal, the fund has disbursed around Rs 370 crore with 100 proposals still pending. This is way below the disbursement amount of Rs. 900 crore in the last fiscal. The sharp dip has come in due to the lesser number of proposals received for ethanol projects. Also the fund has been strapped for cash due to large disbursements done in the earlier two fiscals.

The increase in interest rates has seen a mixed reaction from the industry. Some factory owners feel that this will put additional pressure on them as they are already burdened with the arrears of payment to farmers. Others, however, are of the opinion that the increase will discourage the misuse of the soft loans.

The S&P CNX Nifty is currently trading at 5,270.35, higher by 91.50 points or 1.77% after trading as high as 5,278.20 and as low as 5,203.65. There were 46 stocks advancing against 4 declines on the index.

The top gainers on the Nifty were IDFC up 4.50%, Hindalco up 4.09%, Tata Power up 3.55%, Tata Steel up 3.47% and JP Associates up 3.11%.

Cairn down 1.46%, Sun Pharma down 0.49%, Wipro down 0.18% and Jindal Steel down 0.05% were the only losers on the index.

In the Asian space, Shanghai Composite gained 0.47%, Jakarta Composite advanced 0.33%, KLSE Composite rose 0.60%, Straits Times added 0.15% and Taiwan Weighted climbed 0.77%.

On the other hand, Hang Seng declined 0.26%, Nikkei 225 declined 0.31% and Seoul Composite slipped 0.02%.

The European markets were trading in green as France’s CAC 40 surged 0.89%, Germany’s DAX climbed 0.67% and Britain’s FTSE 100 advanced 0.28%.